Hersha, which owns upscale urban hotels, announced that it would sell Hotel 373 in midtown Manhattan to an offshore investment group for $37 million, which equates to approximately $529,000 per room for the 70-room hotel. The deal values the hotel at $1,680 per square foot.
Hersha expects the deal to close in the second quarter of the fiscal year 2014.
"The pricing on the sale of Hotel 373 is indicative of Manhattan's highly sought after real estate market, and underscores the quality and value of Hersha's New York City hotel portfolio. We believe the sale of Hotel 373 will narrow the gap between the private and public market value of the Company's real estate", stated CEO Jay H. Shah in the company's statement. "The transaction is a strong indication of continuing domestic and international interest from public and private groups seeking to acquire cash flowing real estate in top U.S. gateway markets. We remain optimistic regarding the long-term prospects of the New York City hotel market, but we will continue to search for opportunities to divest high-yielding, stabilized assets and to redeploy the proceeds into higher growth opportunities or to pursue stock buyback opportunities at periods when the stock price does not appropriately reflect value."
TheStreet Ratings team rates HERSHA HOSPITALITY TRUST as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate HERSHA HOSPITALITY TRUST (HT) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and relatively poor performance when compared with the S&P 500 during the past year."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HT's revenue growth has slightly outpaced the industry average of 6.8%. Since the same quarter one year prior, revenues rose by 15.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- HERSHA HOSPITALITY TRUST has shown improvement in its earnings for its most recently reported quarter when compared with the same quarter a year earlier. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, HERSHA HOSPITALITY TRUST continued to lose money by earning -$0.03 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings ($0.02 versus -$0.03).
- The gross profit margin for HERSHA HOSPITALITY TRUST is rather low; currently it is at 15.66%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.70% significantly trails the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 60.1% when compared to the same quarter one year ago, falling from $6.17 million to $2.46 million.
- You can view the full analysis from the report here: HT Ratings Report
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